The Entain share price (LSE: ENT) has finally sprung to life after a dismal year. The FTSE 100-listed international sports betting and gambling company has jumped 9.09% this morning after an upbeat set of interim results Thursday (8 August).
Over 12 months, Entain is the second-worst performer on the entire blue-chip index, crashing 62.35%. Only luxury retailer Burberry Group has done worse, down 68.39%.
Entain, whose brands include Ladbrokes, Coral, Sportingbet, PartyCasino and PartyPoker, has been through the mill.
FTSE 100 value stock
Its buying spree under former CEO Jette Nygaard-Andersen appeared to destroy value rather than build it. Full-year 2023 earnings per share plunged almost 27% from 60.5p to 44.2p. A Crown Prosecution Service bribery investigation into its former Turkish business cast a further shadow. That’s been resolved with a £585m settlement.
The company has laboured along with a caretaker CEO after Nygaard-Andersen’s departure last December. Yet things are looking up with industry veteran Gavin Isaacs taking charge from 2 September. He may prove a lucky general, judging by today’s interim results.
First-half underlying net gaming revenue (NGR) climbed 8% to £2.6bn, helped by stronger than expected win margins during the Euros. Full-year net gaming revenue growth forecasts were lifted from low-single-digit negative to low-single-digit positive. Underlying cash profit (EBITDA) rose 5% to £524m.
Interim CEO Stella David hailed “clear evidence that our hard work improving the group’s operational performance is bearing fruit”, while admitting “there is more work to do”. There certainly is. But if the company had already turned itself around, I wouldn’t be half so interested in buying it.
Entain has an exciting growth opportunity in the US, thanks to its 50:50 joint venture with MGM Resorts International, known as BetMGM. So far, it hasn’t paid off. While revenues have been rising the division is still in the costly investment stage.
BetMGM’s quarterly revenues are steadily rising and market share stabilising though, ahead of further expected investment in the second half.
US growth opportunity
Entain still faces regulatory pressures in the UK and Ireland, but stronger performance overseas helped compensate. The group is also looking to boost margins through Project Romer, upping its net savings target from £70m to £100m for 2026.
Challenges remain. Its debt-to-equity ratio is 1.6, which shows £1.60 of debt for every £1 of shareholder equity. Year-end net debt stood at £3.29bn, up from £2.75bn in 2022. But it had available cash of £1.3bn on 30 June.
Trading at 11.84 times earnings, Entain shares look decent value to me. The trailing yield of 3.18% is below the FTSE 100 average of around 3.7% but there’s scope for progression here.
This now looks like a top recovery stock, to my eyes. That buying spree may pay off in the end, especially if BetMGM proves a winner. A US recession won’t help though.
Gaming will remain controversial and under tight scrutiny, but it’s the type of sector that can boom when the news is good. Personally, I think it’s worth the wager, with a long-term view. I’ll wait until today’s heat goes out of the share price, and look to buy in the days ahead.
